Duke Energy 2012 Annual Report Download - page 181

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PART II
Combined Notes to Consolidated Financial Statements – (Continued)
DUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • CAROLINA POWER & LIGHT COMPANY d/b/a PROGRESS ENERGY
CAROLINAS, INC. • FLORIDA POWER CORPORATION d/b/a PROGRESS ENERY FLORIDA, INC. • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, INC.
9. ASSET RETIREMENT OBLIGATIONS
Asset retirement obligations, which represent legal obligations associated with the retirement of certain tangible long-lived assets, are computed as the present
value of the projected costs for the future retirement of specifi c assets and are recognized in the period in which the liability is incurred, if a reasonable estimate
of fair value can be made. The present value of the liability is added to the carrying amount of the associated asset in the period the liability is incurred and this
additional carrying amount is depreciated over the remaining life of the asset. Subsequent to the initial recognition, the liability is adjusted for any revisions to the
estimated future cash fl ows associated with the asset retirement obligation (with corresponding adjustments to property, plant, and equipment), which can occur
due to a number of factors including, but not limited to, cost escalation, changes in technology applicable to the assets to be retired and changes in federal, state or
local regulations, as well as for accretion of the liability due to the passage of time until the obligation is settled. Depreciation expense is adjusted prospectively for
any increases or decreases to the carrying amount of the associated asset. The recognition of asset retirement obligations has no impact on the earnings of the Duke
Energy Registrants’ regulated operations as the effects of the recognition and subsequent accounting for an asset retirement obligation are offset by the establishment
of regulatory assets and liabilities pursuant to regulatory accounting.
Asset retirement obligations recognized by Duke Energy relate primarily to the decommissioning of nuclear power facilities, asbestos removal, closure of landfi lls
and removal of wind generation assets. Asset retirement obligations recognized by Duke Energy Carolinas, Progress Energy Carolinas and Progress Energy Florida
relate primarily to the decommissioning of nuclear power facilities, asbestos removal and closure of landfi lls at fossil generation facilities. Asset retirement obligations
at Duke Energy Ohio relate primarily to the retirement of gas mains, asbestos abatement at certain generating stations and closure and post-closure activities of
landfi lls. Asset retirement obligations at Duke Energy Indiana relate primarily to obligations associated with future asbestos abatement at certain generating stations
and closure and post-closure activities of landfi lls. Certain of the Duke Energy Registrants’ assets have an indeterminate life, such as transmission and distribution
facilities and thus the fair value of the retirement obligation is not reasonably estimable. A liability for these asset retirement obligations will be recorded when a fair
value is determinable.
The following tables present the changes to the liability associated with asset retirement obligations for the Duke Energy Registrants.
Year Ended December 31, 2012
(in millions)
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Progress
Energy
Carolinas
Progress
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Balance as of January 1, $1,936 $1,846 $1,265 $ 896 $369 $ 27 $ 43
Acquisitions(a) 3,062 — — — — — —
Accretion expense(b) 173 118 86 64 22 1 1
Liabilities settled (15) (3) (2) (2) — — (10)
Revisions in estimates of cash fl ows(c) (4) (2) 234 — 234 — (1)
Liabilities incurred in the current year(d) 24 — 837 698 139 — 4
Balance as of December 31(e) $5,176 $1,959 $2,420 $1,656 $764 $ 28 $ 37
Year Ended December 31, 2011
(in millions)
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Progress
Energy
Carolinas
Progress
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Balance as of January 1, $1,816 $1,728 $ 1,200 $ 849 $ 351 $ 27 $ 46
Accretion expense(b) 111 105 67 49 18 2 2
Liabilities settled (3) (1) — — — (2) —
Revisions in estimates of cash fl ows 1 9 (2) (2) — — (9)
Liabilities incurred in the current year 11 5 — — — — 4
Balance as of December 31 $1,936 $1,846 $ 1,265 $ 896 $ 369 $ 27 $ 43
(a) Represents asset retirement obligations resulting from the merger with Progress Energy. See Note 2 for additional information.
(b) Substantially all of the accretion expense for the years ended December 31, 2012 and 2011 relates to Duke Energy’s regulated electric operations and has been deferred in accordance with regulatory accounting treatment,
as discussed above.
(c) For Progress Energy and Progress Energy Florida, the amounts relate to the retirement of Crystal River Unit 3.
(d) For Progress Energy, Progress Energy Carolinas and Progress Energy Florida, the amounts primarily relate to spent nuclear fuel disposal recorded in the third quarter of 2012 to conform to Duke Energy’s assumptions for the
types of estimated costs in the asset retirement obligations.
(e) Includes $7 million reported in Other current liabilities on the Consolidated Balance Sheets at Duke Energy, Progress Energy and Progress Energy Carolinas.